Wal-mart Stores' Discount Operations

Essay by kingz2University, Master'sB, August 2007

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Wal-mart Stores' Discount OperationsCase Background:This case describes discount retailing and the distinctive features of Wal-mart's discount operations. It also sketches areas into which Wal-mart was diversifying in the mid-1980's.

Q1 What historically have been Wal-mart's key sources of competitive advantage inDiscount retailing?Wal-Mart's Key Sources Of Competitive Advantage in Discount Retailing:Early Mover AdvantageWal-Mart had successfully taken the concept of discount stores from cities to small towns with the logic that if the price offered in the towns was as good or better than stores in cities that were hours away, people would prefer shopping at home.

Wal-Mart was the first of the kind to recognize this opportunity & cash in on it; it didn't have much competition initially.

Locational AdvantageOver a half of Wal-Mart's stores were still located in towns with populations between 5,000 & 25,000, a higher proportion than the rest of the industry.

Rentals were lower compared to the industry average providing better margins.

About one-third of Wal-Mart's were located in metropolitan areas or counties that weren't served by any of Wal-Mart's competitors.

Wal-Mart often commanded 10%-20% of total retail sales in locations where it was alone.

Promotional StrategyWal-Mart had the philosophy of "everyday low prices".

The competitor's cut 20% - 30% on selected items nearly every week. This entailed a lot of promotional/advertising cost for the same.

Wal-Mart saved this advertising/promotional cost by only running fewer promotions.

Customised Merchandise30% of Wal-Mart's merchandise was customized to local needs.

Competitive PricesManagers had more latitude in setting prices unlike other "centrally priced" chains.

Wal-Mart offered lowest price compared to competitors especially when competitors were in the vicinity.

Computerised SKU (Stock Keeping Units)Never filled out stock areas with different merchandise.

Central Computer Linked To Those Of Vendors:On time delivery of stocks.

Better real time knowledge from the vendors.

Computer Aided ProgramIt...